Investing Research Articles

…among a broad sample of actively managed mutual funds, stock picking makes a greater contribution to returns than sector allocation. The average contributions to fund returns from market-sectors-stocks are 79%-9%-12%.

Both EMH and BSH challenge at fundamental levels the continuity of relationships between/among financial variables…

…ETFs offer easy and unique (even leveraged) access to a wide range of asset class/market/style/sector indexes. The 17% of ETFs that compete directly with index mutual funds perform similarly to, or perhaps slightly better than, those mutual funds.

…raw stock returns for firms in new U.S. industries tend on average to be positive and substantial, but very concentrated among a few companies. Risk-adjusted returns for new industries mostly match or underperform the broad U.S. stock market over their first 15-20 years.

…investors should probably use the excess market return (beta), size and liquidity factors in explaining and predicting individual stock returns, but not the book-to-market ratio (value factor) or other commonly used stock/firm-specific factors.

…evidence indicates that an up/down January is predictive of February-December outperformance/underperformance for the broad U.S. stock market (but not for most other equity markets). However, it may not support an effective market timing strategy as a standalone signal.

…VIX is a roughly mean-reverting and asymmetrical measure of the price of stock portfolio insurance, and that price is empirically reasonable.

Do long-term stock market timing models work? If so, which type works best? In their October 2005 paper entitled Timing is Everything: A Comparison and Evaluation of Market Timing Strategies, Chris Brooks, Apostolos Katsaris and Gita Persand investigate the profitability of several timing models over a very long sample of S&P 500 index returns. Specifically,… Keep Reading

A rare sighting…

…”normal” statistical metrics and associated risk management methods do not work in the realm of Black Swans (including financial markets). Redundancy, not optimization, helps manage risk in this realm.